Increasing Broadband Internet Penetration

In the OIC Member Countries

In summary, a review of the research on the economic impact of broadband indicates multiple

effects. Firstly and foremost, the evidence is fairly conclusive about the contribution of

broadband to GDP growth. While the size of this contribution varies, discrepancies can be

related to different datasets as well as model specifications. Secondly, broadband contributes

to employment growth with spillover impacts on the rest of the economy. While deployment

programs are, as expected, concentrated in the construction and telecommunications sectors,

the impact of externalities are greater in sectors with high transaction costs (financial services,

education, and health care).

Broadband impact on productivity

It is logical to assume that productivity of information workers, defined as the portion of the

economically active population whose working function is to process information

(administrative employees, managers, teachers, journalists) depends directly on the

investment in ICT capital (and particularly broadband). The studies conducted by Prof. Raul

Katz

have, in fact, concluded that the larger the percent of the workforce dedicated to

information generation and processing, the higher the proportion of capital stocks invested in

the acquisition of ICT infrastructure (see figure 3).

Figure 3: Information workers an ICT investment

Note: Data for information workforce was derived from ILO statistics while IT Capital was sourced from Kaplan (2001)

Source: Adapted from Katz (2009b)

Figure 3 and the corresponding regression coefficient indicate the existence of a direct

relationship existing between the amount of information workers and IT capital investment in

a given economy: the larger the proportion of information workers in a given the economy, the

more capital is invested in information technology. How can one theoretically explain the

relationship between ICT and productivity? In his economics dissertation at Harvard

University (1982), Charles Jonscher raised the hypothesis that if one can measure the micro-

economic impact of ICT on firm productivity, then one should also be able to link the growth in

Katz, 2009b

y = 0.6123x - 0.0733

= 0.6403

10%

15%

20%

25%

30%

35%

40%

0% 10% 20% 30% 40% 50% 60% 70%

Information Workers as a percent of the economically active

population

IT Capital as a Percentage of Total

Fixed capital